3 Trends in Customer Behavior Impacting Omni-Channel Retail
The two keys to running a successful business have always been: Deliver a quality product, and take good care of your customer. When it comes to the latter—taking care of your customer—an omni-channel retail strategy can help you do just that.
Over the past few years, consumers have made it clear through their buying habits that they want more flexibility when they make purchases than was available even just 5 years ago, and retailers have started to take note by offering omni-channel fulfillment options that provide consumers with the flexibility and convenience that they demand.
Many major retailers, from Walmart to JCPenney, now pursue omni-channel strategies. Though these strategies differ from retailer to retailer, they all mingle varying aspects of ecommerce and brick-and-mortar stores to meet the customers’ expectations and keep them happy and coming back.
But as more and more retailers make the change to omni-channel strategies, it is important that they keep an eye on the trends in customer behavior which will impact their operations.
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Broadly, there are three shopping behaviors that are forcing the supply chains of omni-channel retailers
- A desire for free shipping
- Growing demand for Buy-Online, Pick up in Store (BOPS)
- Checking store inventory before going into the store
1. A desire for free shipping
Thanks to the explosion of Amazon Prime and similar programs from other large retailers, customers have come to expect free shipping when they shop online. In fact, studies show that a large percentage of ecommerce shoppers will use shipping costs to choose which website they buy from. If they don’t or can’t select the provider with free shipping, they will compare the total cost (product + shipping) of a product between providers and go with the cheapest option.
This is great for the consumer because it gives them the ability to make the cheapest purchase, but it has raised the bar for all retailers.
Merchants cannot raise the sell price of the product to cover the shipping cost due to fierce competition from other retailers. This forces supply chains to absorb the cost of shipping. In order to maintain reasonable profit margins, the supply chain of a retailer must find ways to reduce other operating or freight costs.
With parcel freight options being limited, distribution center managers have little choice but to reduce their order fulfillment costs. This could be achieved through the smart implementation of new technologies, such as automated shipping systems that help retailers avoid dimensional weight surcharges and find other savings, or it could be by making smarter partnerships with carriers.
New regional parcel carriers are emerging to fill the need of lower freight costs in metropolitan areas. Additional freight services are being offered that leverage the United States Postal Service (USPS) and there established routes to almost every residential doorstep in the country. The delivery services offered by and through USPS are some of the lowest cost freight options.
2. Growing demand for Buy-Online, Pickup in Store (BOPS)
In the past, when a customer needed to make a purchase, they needed to go to a physical store and buy that item. Ecommerce added a layer of convenience by allowing a customer to shop online so that they could receive the product at home.
But what about customers who expect free shipping from retailers who just can’t afford to offer the option?
That’s where buy-online, pick up in store (BOPS) comes into play.
BOPS is a variation on free shipping, where the consumer gets their purchase shipped to the store nearest to them, free of charge. The consumer has to go to the store instead of having it delivered to their home, but it is still a popular choice for both the retailer and the consumer.
From the outside, the strategy seems simple: Instead of picking, packing, and shipping a small order (usually 1-2 line items), the distribution center just puts that product on the delivery truck that is already going to the store. But the reality is that it is much more complex for supply chain operations than one might expect.
First, if the retailer was responsive to the “Dotcom” era consumer who only ordered online for home delivery, they may have built one or two standalone ecommerce fulfillment centers. This was effective at the time, but is not practical for omni-channel fulfillment because the ecommerce inventory is in a different location from the retail distribution center, and cannot get on the delivery truck without unacceptable time and cost. Second, the physical task of packing, consolidating, and loading small consumer orders with large retail truckloads is more difficult and costly than it may seem. It requires additional handling, coordination, and new packaging methods.
Though it brings with it some complex considerations, when BOPS is incorporated into an omni-channel retail strategy efficiently, it can have a major impact on reducing fulfillment costs while keeping the customer happy and willing to come back for more. A skilled systems integrator can help you determine whether or not BOPS makes sense for your retail operation, as well as determine the technologies and processes that would need to be put in place in order to ensure that you are successful.
3. Checking store inventory before going into the store
his should be obvious, but customers don’t want to waste time traveling to a store only to find out that the store either doesn’t carry a particular item or that the item is out of stock. (This can be of special concern for consumers living in more remote locations, where getting to a retailer is more of a trek.) If a customer is going to drive to a store, they want to be sure that the item that they need is going to be in stock.
In the past, some customers may have tackled this problem by calling the store ahead of time to ask if they had a certain item in stock. While this was helpful to the customer, it could be expensive for the retailer, who had to pay a customer service representative to physically walk the aisles or check the inventory system to confirm status. And of course, it could also be time-consuming for both the employee making the check, and the customer on hold.
Today’s customers are not willing to wait around on hold while someone checks the back inventory. They want to know instantly whether or not an item is in stock so that, if they need to, they can make plans to go elsewhere. They want to go online and check the inventory of the local store (many times multiple stores) to minimize their travel time. This behavior has influenced a lot of change and cost behind the scenes at retailers pursuing omni-channel strategies.
Retailers have historically relied upon different facilities to fulfill different kinds of orders, with certain facilities servicing brick-and-mortar stores and other facilities fulfilling ecommerce order. Each of these facilities may have its own inventory management system.
Retailers have also historically used separate software platforms for their stores and distribution centers. A store kept its own inventory, and so did the distribution center.
Today, the consumer wants to know, through retailer’s website, if the product is already in a store or (if it isn’t) when it can be delivered to that store for pick up. But in order to provide the customer with the inventory visibility that they demand, a retailer must essentially merge all of its various inventory software systems into a single new system—no small feat for an established operation.
So Why Omni-Channel Retail?
All three of these consumer behaviors have challenged omni-channel supply chains. The retailers that have adapted and catered to these behaviors have benefited by keeping existing customers and capturing new ones.
In the future, there is no doubt that these behaviors will change and new behaviors will emerge. The retailers who keep up with these behaviors (take care of their customer) are the ones that will prosper and profit the most.